Sunday, 8 September 2013



India’s manufacturing output contracted sharply in August, prompting economists to warn the country’s ailing economy had not reached the bottom of its slowing cycle. It was for the first time in four years that Indian manufacturing has contracted.

The currencies of India and other emerging markets, including Brazil, Indonesia and Turkey, have fallen sharply as international investors shift capital to newly attractive US assets ahead of the anticipated “taper” of the US Federal Reserve’s programme of quantitative easing through the buying of bonds.
Manmohan Singh, Indian prime minister, urged the developed world to help emerging markets by managing an “orderly exit” from the monetary easing policies that have flooded the world with liquidity since the 2008 financial crisis.

Now, Moody’s warns on India’s sovereign rating

Moody’s Investors Service Inc. has put India on notice, warning that the country’s sovereign rating outlook will depend on the depth and extent of the current economic downturn and the trends in the balance of payments situation.

New RBI chief Rajan raises hopes with action plan

In an unexpectedly detailed and wide-ranging briefing, Rajan outlined plans to attract more funds from overseas by subsidising hedging costs for banks and making it easier for importers and exporters to hedge currency risk. 

Gold buyers rush to order as import rules clarified

The Indian customs department issued its guidelines on how the central bank's call for gold imports to be split 80 percent for domestic use and 20 percent for export would be monitored.

RBI move on 80:20 home loan schemes reduces your risk

Reserve Bank of India (RBI) expressed its displeasure on home loan products such as the 80:20 or 75:25 schemes that make upfront payment to builders. Such schemes are meant to attract buyers in an otherwise lukewarm realty market. Under such schemes, buyers need to pay 20% of the full value of the house upfront after which they don’t need to pay equated monthly instalments (EMIs) for two years.

Why are FIIs selling quality stocks?

Quality stocks are coming under selling pressure; Nifty 50 continues to deliver negative dollar returns. Foreign institutional investors (FIIs) have a reason to worry because the falling rupee is putting at risk the $100 billion they have pumped into Indian equities since 2009. Over the last two weeks, what has surprised everyone is the manner in which “quality stocks” have cracked. In the worst of times, stocks such as ITC and HDFC Bank have held on because of their safe haven status. With the rupee’s fall, the dollar returns for foreign investors have declined meaningfully.


Moody's downgrades subdebt ratings of 11 Indian banks

Affected banks include 8 PSUs and three from the private sector. Moody’s said in a statement that the downgrade reflects the increasing international trend of imposing losses on holders of sub-debt securities as a pre-condition for distressed banks to receive government support.

Gold tumbles by Rs1,250 as rupee, markets recover

Gold prices suffered the steepest fall in a week on Thursday falling by Rs1,250 to Rs30,950 per 10 grams in New Delhi on heavy sell-off by stockists as equity markets and rupee recovered after RBI’s fresh measures.

Prepaid cards: RBI allows cash withdrawal of up to Rs 1,000 per day

The Reserve Bank of India (RBI) on Thursday allowed cash withdrawals of up to Rs 1,000 a day through prepaid cards, including gift cards, issued by banks from point of sale terminals, a move aimed at enhancing customer convenience in using plastic money.
As of now, this facility was available only to debit cards issued by banks.


Bank stocks cheer Raghuram Rajan booster shot, surge over 21%, Yes Bank, Axis Bank shares skyrocket

"It has been decided accordingly to offer such a window to the banks to swap the fresh foreign currency non-resident (banks) FCNR(B) dollar funds, mobilised for a minimum tenor of three years and over at a fixed rate of 3.5 per cent per annum for the tenor of the deposit," RBI said in a notification.

India scrambles to reduce oil bill inflated by sinking rupee

The oil minister is grasping at desperate measures to cut the country's oil costs by nearly $20 billion after the rupee's slide to record lows has left India facing an oil bill potentially 50 percent higher than on May 1. Oil Minister M. Veerappa Moily has suggested pricking the ballooning oil bill with everything from a street theatre campaign encouraging lower fuel use, to shutting fuel stations, to increasing imports from Iran.

Assocham suggests a slew of measures to boost economy

To boost exports, government should lower cost of export credit.Industry body Assocham suggested that the government raise investment in agriculture, cut back on subsidies, aggressively disinvest and roll out tax reforms like DTC and GST to revive economic growth.

The corporate borrowing binge has put India at risk

Unlike say the economic crisis of 1991, when sovereign debt accounted for a major chunk of India’s external debt, this time it is corporate debt that is the major contributor to India’s indebtedness. While external sovereign debt has shrunk to one-fifth of the total external debt over the past two decades, corporate debt has boomed. External commercial borrowings accounted for nearly 31% of the total external debt at the end of fiscal 2013, according to Reserve Bank of India (RBI) data. Worse, there has been a sharp spike in short-term debt. Short-term debt was only one-tenth of external debt in March 1991, and rose to 16% in 2007.

BRICS to commit $100 billion to forex fund

The BRICS group of emerging economies will contribute $100 billion to a fighting fund to steady currency markets destabilized by an expected pullback of US monetary stimulus, Russian President Vladimir Putin said on Thursday. China, holder of the world’s largest foreign exchange reserves, will contribute the bulk of the currency pool.


Click on the picture below and find what you need to know



By Gavyn Davies, chairman of Fulcrum Asset Management and co-founder of Prisma Capital Partners.


To know how only Raghuram Rajan can offer symptomatic treatment to Indian economy click on the slideshow below




Quantitative easing

·         Quantitative easing (QE) is an unconventional monetary policy used by central banks to stimulate the national economy when conventional monetary policy has become ineffective.

·         A central bank implements quantitative easing by buying financial assets from commercial banks and other private institutions with newly created money, in order to inject a pre-determined quantity of money into the economy. 

·         Quantitative easing increases the excess reserves of the banks, and raises the prices of the financial assets bought, which lowers their yield.


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